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16-0823 Tuesday “The Daily Bugle”

16-0823 Tuesday “Daily Bugle”

Tuesday, 23 August 2016

TOPThe Daily Bugle is a free daily newsletter from Full Circle Compliance, containing changes to export/import regulations (ATF, Customs, NISPOM, EAR, FACR/OFAC, FTR/AES, HTSUS, and ITAR), plus news and events. Subscribe 
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  1. Commerce/BIS Amends EAR, Addition of Certain Persons to the Entity List 
  2. Commerce/BIS Seeks Comments on Temporary Exports to Mexico Under License Exception TMP 
  3. DHS Posts Correction Regarding Civil Monetary Penalty Adjustments for Inflation 
  4. Justice/ATF Seeks Comments on Form ATF F 7(5310.12)/7 CR (5310.16), Application for Federal Firearms License 
  5. Justice/ATF Seeks Comments on Notification of Change of Mailing or Premise Address 
  1. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
  2. Commerce/Census: “ACE AESDirect WebLink Recent Change” 
  3. Commerce/BIS: (No new postings.) 
  4. DHS/ICE: “4 Former Executives Sentenced for Illegally Exporting Weapons Parts” 
  5. State/DDTC: (No new postings.) 
  1. ST&R Trade Report: “Aiding Exports to Mexico for IMMEX Operations is Aim of BIS Proposal” 
  1. J. Cortez: “Decrementing Export Licenses in the Automated Commercial Environment (ACE)” 
  2. L.E. Christensen, B.D. Linney & K.J. Miller: “DDTC and BIS Harmonize Destination Control Statements; DDTC Ties Up Loose Ends” 
  1. Bartlett’s Unfamiliar Quotations 
  2. Are Your Copies of Regulations Up to Date? Latest Changes: ATF (15 Jan 2016), Customs (22 Mar 2016), DOD/NISPOM (18 May 2016), EAR (23 Aug 2016), FACR/OFAC (18 May 2016), FTR (15 May 2015), HTSUS (1 Jul 2016), ITAR (17 Aug 2016) 

EXIMEX/IM ITEMS FROM TODAY’S FEDERAL REGISTER

EXIM_a1

1. Commerce/BIS Amends EAR, Addition of Certain Persons to the Entity List
(Source: Federal Register) [Excerpts.]
 
81 FR 57451-57456: Addition of Certain Persons to the Entity List
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Final rule.
* SUMMARY: This final rule amends the Export Administration Regulations (EAR) by adding ten persons under fourteen entries to the Entity List. The ten persons who are added to the Entity List have been determined by the U.S. Government to be acting contrary to the national security or foreign policy interests of the United States. These ten persons will be listed on the Entity List under the destinations of Iraq, the Philippines, Syria, and Turkey.
* DATES: This rule is effective August 23, 2016.
* FOR FURTHER INFORMATION CONTACT: Chair, End-User Review Committee, Office of the Assistant Secretary, Export Administration, Bureau of Industry and Security, Department of Commerce, Phone: (202) 482-5991, Fax: (202) 482-3911, Email: ERC@bis.doc.gov.
* SUPPLEMENTARY INFORMATION: …
   For the ten persons under fourteen entries added to the Entity List, BIS imposes a license requirement for all items subject to the EAR and a license review policy of presumption of denial. The license requirements apply to any transaction in which items are to be exported, reexported, or transferred (in-country) to any of the persons or in which such persons act as purchaser, intermediate consignee, ultimate consignee, or end-user. In addition, no license exceptions are available for exports, reexports, or transfers (in-country) to the persons being added to the Entity List in this rule. The acronym “a.k.a.” (also known as) is used in entries on the Entity List to help exporters, reexporters and transferors better identify listed persons on the Entity List.
   This final rule adds the following ten persons under fourteen entries to the Entity List: …
   Dated: August 17, 2016.
Kevin J. Wolf, Assistant Secretary for Export Administration.

* * * * * * * * * * * * * * * * * * * * 

 
81 FR 57505-57506: Temporary Exports to Mexico Under License Exception TMP
* AGENCY: Bureau of Industry and Security, Commerce.
* ACTION: Proposed rule.
* SUMMARY: This proposed rule would align the time limit of License Exception Temporary Imports, Exports, Reexports, and Transfers (in-country) (TMP), which authorizes, among other things, certain temporary exports to Mexico, with the time limit of Mexico’s Decree for the Promotion of Manufacturing, Maquiladora and Export Services (IMMEX) program. Currently, TMP allows for the temporary export and reexport of various items subject to the Export Administration Regulations (EAR), as long as the items are returned no later than one year after export, reexport, or transfer if not consumed or destroyed during the period of authorized use. Other than a four-year period for certain personal protective equipment, the one-year limit extends to all items shipped under license exception TMP. However, the one-year period does not align with the time constraints of Mexico’s IMMEX program, which allows imports of items for manufacturing operations on a time limit that may exceed 18 months. This rule proposes to amend TMP to complement the timeline of the IMMEX program. Under this proposed amendment, items temporarily exported or reexported under license exception TMP and imported under the provisions of the IMMEX program would be authorized to remain in Mexico for up to four years from the date of export or reexport.
* DATES: Comments must be received by October 24, 2016.
* ADDRESSES: You may submit comments by any of the following methods: …
* FOR FURTHER INFORMATION CONTACT: Regulatory Policy Division, Office of Exporter Services, Bureau of Industry and Security, by telephone (202) 482-2440 or email: RPD2@bis.doc.gov.
* SUPPLEMENTARY INFORMATION: …
   U.S. companies that produce items subject to the EAR and ship those items to Mexico under IMMEX have notified the Bureau of Industry and Security of this discrepancy and have requested that BIS amend the EAR to increase compatibility with IMMEX. Considering the strength of Mexico’s export control regimen, as exemplified by its accession as a member to the Wassenaar Arrangement, the Australia Group, and the Nuclear Suppliers Group, BIS proposes to amend Sec. 740.9(a) to account for IMMEX’s time limit. For the purpose of simplicity, BIS does not propose to match the various time periods instituted by IMMEX. Instead, this rule proposes to revise Sec. 740.9(a)(8) to allow temporary exports and reexports to remain in Mexico for up to four years, which accommodates the maximum available time that temporarily imported items may remain in Mexico under IMMEX and is in parallel with the validity period of BIS’s licenses. Additionally, this rule proposes to revise introductory paragraph Sec. 740.9(a)(14) to include a reference to Sec. 740.9(a)(8) as an exception to the one-year time limit of TMP. …
   Kevin J. Wolf, Assistant Secretary for Export Administration.
* * * * * * * * * * * * * * * * * * * * 

EXIM_a33. DHS Posts Correction Regarding Civil Monetary Penalty Adjustments for Inflation
(Source: Federal Register) [Excerpts.]
 
81 FR 57442: Civil Monetary Penalty Adjustments for Inflation; Correction
* AGENCY: Department of Homeland Security.
* ACTION: Interim final rule; correction.
* DATES: This correction is effective on August 23, 2016.
* FOR FURTHER INFORMATION CONTACT: Megan Westmoreland, Attorney-Advisor, Office of the General Counsel, U.S. Department of Homeland Security. Phone: 202-447-4384.
* SUPPLEMENTARY INFORMATION: In FR Doc. 2016-15673, appearing on page 42987 in the Federal Register of Friday, July 1, 2016, DHS makes the following correction:
 
Sec. 274a.10 [Corrected]
 
On page 43002, in the first column, in part 274a Control of Employment of Aliens, in amendment 7, DHS corrects the instruction “In Sec. 274a.10, revise paragraphs (b)(1)(ii)(A),(B),(C), and (b)(1)(iii)(2) to read as follows:” to read “In Sec. 274a.10, revise paragraphs (b)(1)(ii)(A),(B),(C), and (b)(2) to read as follows:”
   Dated: August 11, 2016.
Christina E. McDonald, Associate General Counsel for Regulatory Affairs.

 
* * * * * * * * * * * * * * * * * * * * 

EXIM_a44. Justice/ATF Seeks Comments on Form ATF F 7(5310.12)/7 CR (5310.16), Application for Federal Firearms License
(Source: Federal Register) [Excerpts.]
 
81 FR 57616-57617: Agency Information Collection Activities; Proposed eCollection eComments Requested; Application for Federal Firearms License–ATF F 7(5310.12)/7 CR (5310.16)
* AGENCY: Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
* ACTION: 60-day notice. …
* DATES: Comments are encouraged and will be accepted for 60 days until October 24, 2016.
* FOR FURTHER INFORMATION CONTACT: Tracey Robertson, Chief, Federal Firearms Licensing Center, 244 Needy Road, Martinsburg, WV 25405 or via email at: tracey.robertson@atf.gov. Written comments and/or suggestions can also be directed to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention Department of Justice Desk Officer, Washington, DC 20503 or sent to OIRA_submissions@omb.eop.gov.
* SUPPLEMENTARY INFORMATION: …
  – The Title of the Form/Collection: Application for Federal
Firearms License.
  – Form number (if applicable): ATF F 7(5310.12)/7 CR (5310.16).
  – Component: Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Department of Justice.
  – Abstract: The law of 18 U.S.C. 923(a)(1), requires a person wishing to transport, ship, or receive firearms in interstate or foreign commerce to pay a fee, to file an application and to obtain a license before engaging in business. ATF F 5310.12/7 CR 5310.16 will be for the purpose of ensuring this collection of information is necessary to insure that the person who wishes to be licensed as required by section 923 meets the requirements of the section for the license. Additionally, this form will be used by the public when applying for a Federal firearms license to collect curios and relics to facilitate a personal collection in interstate and foreign commerce. The information requested on the form establishes eligibility for all license types.
   Dated: August 17, 2016.
Jerri Murray, Department Clearance Officer for PRA, U.S. Department of Justice.

* * * * * * * * * * * * * * * * * * * * 

EXIM_a55. Justice/ATF Seeks Comments on Notification of Change of Mailing or Premise Address
(Source: Federal Register) [Excerpts.]
 
81 FR 57615-57616: Agency Information Collection Activities; Proposed eCollection eComments Requested; Notification of Change of Mailing or Premise Address
* AGENCY: Bureau of Alcohol, Tobacco, Firearms and Explosives, Department of Justice.
* ACTION: 30-day notice. …
* DATES: Comments are encouraged and will be accepted for an additional 30 days until September 22, 2016.
* FOR FURTHER INFORMATION CONTACT: Shawn Stevens, ATF Industry Liaison, Federal Explosives Licensing Center, 244 Needy Road, Martinsburg, WV 25405, at telephone: 304-616-4421. Written comments and/or suggestions can also be directed to the Office of Management and Budget, Office of Information and Regulatory Affairs, Attention Department of Justice Desk Officer, Washington, DC 20503 or sent to OIRA_submissions@omb.eop.gov.
* SUPPLEMENTARY INFORMATION: …
  – The Title of the Form/Collection: Notification of Change of Mailing or Premise Address.
  – Form number: None.
  – Component: Bureau of Alcohol, Tobacco, Firearms and Explosives, U.S. Department of Justice.
  – Abstract: During the term of a license or permit, a licensee or permittee may move his business or operations to a new address at whichhe intends to regularly carry on his business or operations, without procuring a new license or permit. However, in every case, the licensee or permittee shall notify the Chief, Federal Explosives Licensing Center of the change. This collection of information is contained in 27 CFR 555.54.
   Dated: August 18, 2016.
Jerri Murray, Department Clearance Officer for PRA, U.S. Department of Justice.

* * * * * * * * * * * * * * * * * * * * 

OGS
OTHER GOVERNMENT SOURCES

OGS_a16. Ex/Im Items Scheduled for Publication in Future Federal Register Editions
(Source: Federal Register)

* Commerce; Industry and Security Bureau; NOTICES; Meetings [Publication Date: 24 August 2016.]:
  – Materials Technicial Advisory Committee
  – Regulations and Procedures Technical Advisory Committee
  – Transportation and Related Equipment Technical Advisory Committee

* U.S. Customs and Border Protection; NOTICES; Agency Information Collection Activities; Proposals, Submissions, and Approvals: Application to Use Automated Commercial Environment [Publication Date: 24 August 2016.]

* * * * * * * * * * * * * * * * * * * *

OGS_a57. Commerce/Census: “ACE AESDirect WebLink Recent Change”

(Source: census@subscriptions.census.gov, 23 Aug 2016)
 
Due to mandatory U.S. Customs and Border Protection (CBP) security restrictions that were recently implemented, it will no longer be possible to display AESDirect content in iFrames. Any ACE AESDirect WebLink software developers currently using iFrames will need to develop an alternate implementation that does not include iFrames.
 
It is imperative that ACE AESDirect WebLink developers follow the process as outlined in the WebLink Process Overview documentation. Step #5 is a crucial step (i.e., Clicking the Submit AESDirect Filing) that triggers some events in the background that are critical to current and future functionality. The ACE AESDirect WebLink outage experienced by some users after the August 2nd AESDirect deployment was caused by missing step #5.   Future deployments of AESDirect will expose this implementation omission again.
 
Similarly with the ACE AESDirect WebLink Test Environment, it is imperative that ACE AESDirect WebLink developers follow the process as outlined in the WebLink Test Process Overview documentation. Step #5 (i.e., Clicking the Submit AESDirect Filing) and Step #6 (i.e., navigating to the SessionBroker URL) are critical steps that the AESDirect Support Team has observed were missed. Again, the omission of these steps will be exposed upon a future deployment of AESDirect with outages for the users of ACE AESDirect WebLink software.

For more information regarding these changes please contact the U.S. Customs and Border Protection at ASKACE@CBP.DHS.GOV.
* * * * * * * * * * * * * * * * * * * *

OGS_a28. Commerce/BIS: (No new postings.)

(Source: Commerce/BIS)
* * * * * * * * * * * * * * * * * * * *

OGS_a39. DHS/ICE: “4 Former Executives Sentenced for Illegally Exporting Weapons Parts”

(Source: DHS/ICE) [Excerpts.]
 
Four former executives of Sabre Defence Industries, LLC, a defense contractor formerly based in Nashville, were sentenced Friday in connection with their role in illegally exporting firearm components and other defense items. The sentencing follows an investigation by U.S. Immigration and Customs Enforcement’s (ICE) Homeland Security Investigations (HSI) and the Bureau of Alcohol, Tobacco, Firearms & Explosives with assistance from the Department of Defense-Defense Criminal Investigative Service.
 
Charles Shearon, 60, of Goodlettsville, Elmer Hill, 69, of Brentwood, Michael Curlett, 49, of Wixom, Michigan, and Arnold See, Jr., 59, of Murfreesboro were sentenced by U.S. District Judge Todd J. Campbell. Sentences ranged from 13 to 18 months. All four previously pleaded guilty in March 2011, to violating the Arms Export Control Act and conspiracy. …
 
According to court documents, all four men admitted to their role in attempting to conceal Sabre’s illegal exports from 2003 until 2009 through the use of falsified shipping documents and the use of shipping crates with false bottoms. Sabre maintained a fictitious set of business records to conceal its unlawful shipments of firearm parts, lied about the value of items on shipping documents and also illegally imported firearm silencers.
 
Each of the four defendants pleaded guilty to violating the Arms Export Control Act, and to conspiring to do so. Sabre had contracts with the U.S. government valued at more than $74 million for the manufacture of certain military-grade weapons, including the M16 rifle and other semi-automatic and fully-automatic firearms. In pleading guilty, each of these four defendants admitted to conspiring to export firearms and firearm components that were classified as defense articles without first obtaining the required authorization from the U.S. Department of State. …
* * * * * * * * * * * * * * * * * * * *

OGS_a410. State/DDTC: (No new postings.)

(Source: State/DDTC)
* * * * * * * * * * * * * * * * * * * *

NWSNEWS

 
The Bureau of Industry and Security is proposing to align the time limit of license exception TMP (temporary imports, exports, reexports and transfers (in-country)) with the time limit of Mexico’s IMMEX program. Comments on this proposal are due no later than Oct. 24.
 
License exception TMP currently allows for the temporary export and reexport of various items subject to the Export Administration Regulations as long as they are returned no more than one year later, unless they are consumed or destroyed during the period of authorized use abroad. Other than a four-year period for certain personal protective equipment, this one-year limit extends to all items shipped under license exception TMP.
 
However, this one-year period does not align with the time constraints of Mexico’s Decree for the Promotion of Manufacturing, Maquiladora and Export Services (IMMEX) program, which allows quota- and tax-free imports of items for manufacturing operations on a time limit that may exceed 18 months. BIS states that this discrepancy reduces the efficacy of both policies and thus hinders the shipment of items subject to the EAR to and from Mexico.
 
BIS is therefore proposing to authorize items temporarily exported or reexported under license exception TMP and imported under the provisions of the IMMEX program to remain in Mexico for up to four years. According to BIS, this period accommodates the maximum available time that temporarily imported items may remain in Mexico under IMMEX and is in parallel with the validity period of BIS licenses. This change should reduce the paperwork burden on exporters but BIS does not believe it will lead to a significant increase in exports to Mexico.

* * * * * * * * * * * * * * * * * * * *

COMMCOMMENTARY

COMM_a112. J. Cortez: “Decrementing Export Licenses in the Automated Commercial Environment (ACE)”

 
* Author: Joe Cortez, Senior Trade Advisory, Braumiller Consulting Group, LLP, Info@BraumillerLaw.com
 
As of July 28, 2016, the Bureau of Industry and Security (BIS), working with U.S. Customs and Border Protection, deployed a new AES function to assist filers reporting BIS-licensed exports.
 
AES began decrementing the BIS license value and now returns one or more Informational Messages to the filer. These messages will not preclude the issuance of an ITN, nor will they result in a Fatal Error. Depending on the circumstances of the filing, the filer may be notified:
 
  – that the BIS license value has been met or exceeded by a prior filing;
  – that the BIS license value has been exceeded by the current filing;
  – that the allowable shipping tolerance (10% over BIS license value) has been exceeded by the current filing; and of the remaining value on the BIS license (may be negative).
 
So this new change to ACE reporting applies to all BIS licenses that have a value associated with it. However, there are some encryption license agreements that have an open value, so BIS has turned the decrementation off for these. They are for licenses with ECCNs of 5A002, 5B002, 5D002 and 5E002. For licenses that are based on quantity, BIS is not decrementing against them.
 
As far as data input is concerned, the ACE screens are not impacted, so reporting the BIS license information is the same. The only difference is the messages mentioned above.
 
So, what impact does this new reporting have on your record keeping? For now, companies will have to continue to monitor their shipments. Currently, there are no reports to give this back to the administrator of the company. The company would need to pay attention to the balance returned in their last transmission for this up-to-date information. Hopefully, in the future, being able to access license value in the ACE to assist a company in reviewing their license status will become a feature of the ACE reports.

* * * * * * * * * * * * * * * * * * * *

COMM_a213. L.E. Christensen, B.D. Linney & K.J. Miller: “DDTC and BIS Harmonize Destination Control Statements; DDTC Ties Up Loose Ends”
 
* Authors: Larry E. Christensen, Esq., lchristensen@milchev.com, 202-626-1469; Barbara D. Linney, Esq., blinney@milchev.com, 202-626-5806; and Kevin J. Miller, kmiller@milchev.com, 202-661-6425. All of Miller & Chevalier Chartered.
 
On August 17, 2016, the Bureau of Industry and Security of the U.S. Department of Commerce (BIS) and the Directorate of Defense Trade Controls of the U.S. Department of State (DDTC) issued final rules designed to harmonize their requirements for use of a Destination Control Statement (DCS) on export documents, clarify the use of DDTC authorizations for export of items subject to the Export Administration Regulations (EAR), add a new section on advisory opinions to the International Traffic in Arms Regulations (ITAR), and make various conforming and other minor revisions to the ITAR. The rules will become effective on November 15, 2016.
 
As of the effective date, under both the ITAR and EAR, exporters no longer will be required to include a DCS on multiple export documents such as the air waybill, bill of lading or other export control documents. The rules will limit the DCS requirement to the commercial invoice only. Under the ITAR, the commercial invoice must also specify the country of ultimate destination, the end-user and the license or other approval number or exemption citation. Under the EAR, the commercial invoice must also include the specific ECCN or ECCNs for tangible ”600 series” items and tangible 9×515 items only. See EAR § 758.6(a)(2), as amended by the BIS final rule, available here. For other EAR items, there is no requirement to include the classification information on the commercial invoice, although BIS encourages the inclusion of that information as an export compliance best practice. See, Fed. Reg. 54721, 54730. Under the ITAR, the exporter must provide the end-user and consignees with the appropriate EAR classification information (i.e., ECCN or EAR 99 designation) for items subject to the EAR shipped under an ITAR license or approval, but this information need not be included in the commercial invoice and there is no requirement to provide the specific U.S. Munitions List (USML) category for USML items included in the shipment. See ITAR §123.9(b)(2), as amended by the DDTC final rule, available here.
 
We have asked BIS whether exporters may begin using the new regulations prior to November 15, 2016 in order to make reprogramming of automated systems more convenient. The agencies have stated they will publish FAQs and provide public outreach on the new requirements over the next week or two.
 
Determining DCS Requirements under the New Rules
 
In summary, the new DCS rules require analysis of five categories of exports. Of these five categories, only the last two require specifying the classification of items shipped. The five categories are as follows:
 
  – A shipment of exclusively EAR99 items does not require a DCS and does not require informing the consignee of the classification in any document.
    
  – A shipment of only CCL items, other than items classified under “600 series” ECCNs or 9×515 ECCNs, requires a DCS on a commercial invoice for tangible exports but does not require the specific ECCNs of items included in the shipment to be listed.
    
  – A shipment of solely USML tangible items requires a DCS on a commercial invoice but does not require the exporter to specify the specific USML classification of the items shipped.
    
  – A shipment of items subject to the EAR including but not limited to tangible “600 series” items or tangible ECCN 9×515 items requires a DCS under the EAR and the commercial invoice must specify the ECCN or ECCNs of the any tangible “600 series” items or tangible ECCN 9×515 items included in the shipment.
    
  – A combined shipment of USML items and items subject to the EAR requires a DCS and the exporter must provide the end-user and consignees with the appropriate EAR classification information (i.e., ECCN or EAR 99 designation) for all items subject to the EAR included in the shipment, but this information need not be included in the commercial invoice. There is no need to provide the specific USML classifications for the ITAR-controlled items included in the shipment.
 
The New EAR DCS
 
Consistent with the DCS requirements prior to the effective date of the BIS final rule, the new rule does not require a DCS for exports of EAR99 items or any items exported under License Exceptions BAG or GFT. Any other shipment of a tangible item subject to the EAR from the United States, including the export of any tangible items classified under 9×515 or “600 series” of the CCL will require the DCS specified in paragraph § 758.6(a)(1) on the commercial invoice. The commercial invoice must include the specific ECCN or ECCNs for items classified under 9×515 and the “600” series only.
 
The new Section 758.6 of the EAR will provide as follows:
 
   § 758.6 Destination control statement and other information furnished to consignees.
 
   (a) The exporter must incorporate the following information as an integral part of the commercial invoice whenever items on the Commerce Control List are shipped (i.e., exported in tangible form), unless the shipment (i.e., the tangible export) may be made under License
 
   Exception BAG or GFT (see part 740 of the EAR) or the item is designated as EAR99:
 
   (1) The following statement: ”These items are controlled by the U.S. Government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations” and
 
   (2) The ECCN(s) for any 9×515 or ”600 series” ”items” being shipped (i.e., exported in tangible form).
 
   Note 1 to paragraph (a). In paragraph (a)(1), the term ‘authorized’ includes exports, reexports and transfers (in-country) designated under No License Required (NLR).
 
   Note 2 to paragraph (a). The phrase ‘country of ultimate destination’ means the country specified on the commercial invoice where the ultimate consignee or end user will receive the items as an ”export.”
 
   Note 3 to paragraph (a). The phrase ‘or as otherwise authorized by U.S. law and regulations’ is included because the EAR contain specific exemptions from licensing (e.g., EAR license exceptions and NLR designations) and do not control the reexport of foreign-made items containing less than a de minimis amount of controlled content. See § 734.4 and Supplement No. 2 to part 748.
 
The current Section 758.6 EAR provides that “At a minimum, the DCS must state: These commodities, technology, or software were exported from the United States in accordance with the Export Administration Regulations. Diversion contrary to U.S. law is prohibited.” The new rule, on the other hand, makes the form of the DCS mandatory and preserves the requirement to specify ECCNs for tangible “600 series” and 9×515 items on the commercial invoice, while eliminating the need to include the DCS or classification information on export documents other than the commercial invoice.
 
The New ITAR DCS
 
The new ITAR § 123.9 will provide as follows:
 
   § 123.9 Country of ultimate destination and approval of reexports or retransfers.
 
   (1) The exporter must incorporate the following information as an integral part of the commercial invoice, whenever defense articles are to be shipped (exported in tangible form), retransferred (in tangible form), or reexported (in tangible form) pursuant to a license or other approval under this subchapter:
 
   (i) The country of ultimate destination;
 
   (ii) The end-user;
 
   (iii) The license or other approval number or exemption citation; and
 
   (iv) The following statement: ”These items are controlled by the U.S. government and authorized for export only to the country of ultimate destination for use by the ultimate consignee or end-user(s) herein identified. They may not be resold, transferred, or otherwise disposed of, to any other country or to any person other than the authorized ultimate consignee or end-user(s), either in their original form or after being incorporated into other items, without first obtaining approval from the U.S. government or as otherwise authorized by U.S. law and regulations.”
 
   Note to paragraph (b)(1)(iv): The phrase ”or as otherwise authorized by U.S. law and regulations” is included because U.S. regulations contain specific exemptions from licensing requirements (e.g., ITAR exemptions, and EAR license exceptions and No License Required designations) and allow for certain amounts of U.S. origin content in foreign made items (see 15 CFR 734).
 
   (2) When exporting items subject to the EAR (see §§ 120.5, 120.42 and 123.1(b) of this subchapter) pursuant to a Department of State license or other approval, the U.S. exporter must also provide the end-user and consignees with the appropriate EAR classification information for each item. This includes the Export Control Classification Number (ECCN) or EAR99 designation.
 
The harmonized DCS is largely adopted from the prior ITAR language. The DCS is required for all ITAR for tangible exports, retransfers, and reexports of defense articles, including tangible technical data. We hope DDTC will develop an FAQ to clarify the application of the new DCS rule to tangible technical data and whether DDTC expects exports of technical data in electronic form to include a DCS.
 
EAR Items Shipped Under DDTC Authorizations
 
In order to clarify requirements applicable to shipments of EAR items under DDTC authorizations, the DDTC final rule will revise Section 120.5(b) of the ITAR, to read as follows:
 
Section 120.5 Relation to regulations of other agencies; export of items subject to the EAR. “(b) A license or other approval (see § 120.20) from the Department of State granted in accordance with this subchapter may also authorize the export of items subject to the EAR (see § 120.42). An exemption (see parts 123, 124, 125, and 126 of this subchapter) may only be used to export an item subject to the EAR that is for use in or with a defense article and is included in the same shipment as any defense article. No exemption under this subchapter may be utilized to export an item subject to the EAR if not accompanied by a defense article. Separate approval from the Department of Commerce is not required for these items. Those items subject to the EAR exported pursuant to a Department of State license or other approval would remain under the jurisdiction of the Department of Commerce for any subsequent transactions. The inclusion of items subject to the EAR on a Department of State license or other approval does not change the licensing jurisdiction of the items. (See § 123.1(b) of this subchapter for guidance on identifying items subject to the EAR in a license application to the Department of State.)
 
The new language makes clear that shipments of comingled commodities may be made under exemptions or license authorizations, which will reduce the licensing burden on exporters. The revised Section 120.5 also clarifies that shipping items subject to the EAR with defense articles under ITAR exemptions or DDTC authorizations does not eliminate BIS jurisdiction over subsequent transactions involving the items, which will be governed by BIS requirements for reexport, retransfer, de minimis exclusion under the EAR, and recordkeeping.
 
However, the requirement under Section 123.9(b)(2) to provide all CCL and EAR99 classifications creates some level of disincentive to use a single shipment that combines items subject to the ITAR and items subject to the EAR. One commentator expressed concern about the requirement. DDTC responded that while, “the Department understands the comment, given the hybrid nature of the ITAR authorization under the § 120.5(b) process, the Department has determined the requirements are warranted.” 81 Fed. Reg. 54732. In addition, it should be noted that for combined shipments, the EAR99 classification and all CCL classifications for items may be provided to the consignee by other means and need not be on the commercial invoice under the new rule.
 
Other Changes to the ITAR
 
In addition to the revisions described above, the DDTC final rule makes various conforming changes and minor corrections, as well as a few additional changes, as follows:
 
A new paragraph (d) is added to Section 123.9 of the ITAR to clarify the requirements for retransferring items subject to the EAR pursuant to a request for written approval from DDTC.
 
The requirement to provide seven paper copies for various requests addressed in sections 124.7, 124.12, 124.14, 125.2, 125.7 and 126.9 is removed.
 
Section 126.9 (a) was amended and a new paragraph 126.9(c) was added to clarify DDTC’s current practice regarding requests to interpret ITAR requirements. The Federal Register notice regarding the final rule states that DDTC is undertaking a review of the advisory opinion process which will be addressed in a future rule.
 
Practical Implementation Challenges
 
The implementation challenges of the new DCS rules will vary from company to company. For corporations or forwarders that have automated the production of commercial invoices, the task will be to find IT resources and funding to modify the automation software. For firms that rely upon manual processes to generate commercial invoices, training will be required along with the drafting of new desk top procedures.
 
Companies have 90 days to implement the changes. For shipping companies, freight forwarders, and others that have been frustrated by the challenge of printing a DCS on the air waybill, bill of lading or other export control documents with limited space, the new rules will be a substantial benefit. The harmonization of the EAR and ITAR statements will also be a benefit. Nonetheless, implementation of the changes will take time because of the need to update automated systems and forms and provide training on changes required for both manual and automated systems.
 
Some companies issue separate billing and commercial invoices, and this may have an impact on the reprogramming of automated systems. The commercial invoice may be separate from the billing invoice and include the DCS without adding it to the billing invoice. A company may issue only one invoice for both billing and DCS compliance purposes, and in that case the sole invoice must include the DCS.
 
One commenter expressed concern about the ITAR use of the term “commercial invoice” versus the historic use in the ITAR of the term “invoice” because for some exporters, the term “invoice” refers to the final billing document that moves electronically, whereas the commercial invoice moves with the freight. DDTC responded that “The Department agrees that the terms should be harmonized. Based on other comments received, the term “commercial invoice” is well understood by industry, so this final rule adopts the term “commercial invoice” to reference the document that moves with the freight.”

81 Fed. Reg. 54732, 54733.
 
The ECCN for the “600 series” and 9×515 items, but not the items level paragraph, must be included along with the DCS somewhere on the commercial invoice. For example, in the case of a component classified under ECCN 9A610.x, the requirement is to include specifically ECCN 9A610 on the commercial invoice. Including the items level paragraph of .x is NOT required, but nothing in the rules prohibit an exporter from additionally providing the items level classification with the “600 series” or 9×515 ECCN or ECCNs. See Comment 43 and the BIS response at 81 Fed. Reg. 54721, 54729. This is not a policy or regulatory change. Some fortunate exporters and forwarders who already provide the five-digit ECCN on an automated commercial invoice may find the reprogramming of their commercial invoice need only entail changing the text of the new DCS without any other logic changes for the compliance and documents generation work flow.
 
The preamble to the new EAR rule makes clear that exporters may provide specific ECCNs that are not required by the amended Section 758.6(a)(2). See, Fed. Reg. 54721, 54730. For example, inclusion of ECCN 7A994 in the commercial invoice is permitted, but this is not a requirement. It is a good practice to include classifications in communications of some type with a consignee. We also caution that when using an ITAR reexport authorization such as a license or approval, the ITAR DCS requirement applies to tangible items and other notifications may be required. Moreover, when using certain EAR license exceptions such as License Exception STA, other notification requirements may apply. Neither DDTC nor BIS intend the new DCS to include every notification requirement throughout the ITAR and EAR respectively, and it will be the responsibility of exporters to comply with all applicable requirements.
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ENEDITOR’S NOTES

(Source: Editor)


“She’s a lovely person. She deserves a good husband. Marry her before she finds one.”

  – Harpo Marx (Arthur Duer Marx, born Adolph Marx, 1888-1964, was an American comedian, film star, mime artist and harp musician, and the second-oldest of the Marx Brothers.)

 

“Wear your learning like your watch, in a private pocket; and do not pull it out, and strike it, merely to show that you have one.”

  – Philip Stanhope (Philip Dormer Stanhope, 4th Earl of Chesterfield KG PC, 1694-1773, was a British statesman, and a man of letters and wit.)
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EN_a215. Are Your Copies of Regulations Up to Date?
(Source: Editor)

The official versions of the following regulations are published annually in the U.S. Code of Federal Regulations (C.F.R.), but are updated as amended in the Federal Register.  Changes to applicable regulations are listed below.
 
*
ATF ARMS IMPORT REGULATIONS
: 27 CFR Part 447-Importation of Arms, Ammunition, and Implements of War
  – Last Amendment: 15 Jan 2016: 81 FR 2657-2723: Machineguns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Trust or Legal Entity With Respect To Making or Transferring a Firearm  
 
*
CUSTOMS REGULATIONS
: 19 CFR, Ch. 1, Pts. 0-199
  – Last Amendment: 22 Mar 2015: 81 FR 15159: Customs and Border Protection’s Bond Program; Correction 

* DOD NATIONAL INDUSTRIAL SECURITY PROGRAM OPERATING MANUAL (NISPOM): DoD 5220.22-M
  – Last Amendment: 18 May 2016: Change 2: Implement an insider threat program; reporting requirements for Cleared Defense Contractors; alignment with Federal standards for classified information systems; incorporated and canceled Supp. 1 to the NISPOM  (Summary here.)

* EXPORT ADMINISTRATION REGULATIONS (EAR): 15 CFR Subtit. B, Ch. VII, Pts. 730-774 
  – Last Amendment: 23 Aug 2016: 81 FR 57451-57456: Addition of Certain Persons to the Entity List 

  
*
FOREIGN ASSETS CONTROL REGULATIONS (OFAC FACR)
: 31 CFR, Parts 500-599, Embargoes, Sanctions, Executive Orders
  – Last Amendment: 18 May 2016: 81 FR 31169-31171: Burmese Sanctions Regulations 
 
*
FOREIGN TRADE REGULATIONS (FTR)
: 15 CFR Part 30
  – Last Amendment: 15 May 2015; 80 FR 27853-27854: Foreign Trade Regulations (FTR): Reinstatement of Exemptions Related to Temporary Exports, Carnets, and Shipments Under a Temporary Import Bond 
  – HTS codes that are not valid for AES are available
here.
  – The latest edition (9 May 2016) of Bartlett’s Annotated FTR (“BAFTR”), by James E. Bartlett III, is available for downloading in Word format. The BAFTR contains all FTR amendments, FTR Letters and Notices, a large Index, and footnotes containing case annotations, practice tips, and Census/AES guidance.  Subscribers receive revised copies every time the FTR is amended.  The BAFTR is available by annual subscription from the Full Circle Compliance website.  BITAR subscribers are entitled to a 25% discount on subscriptions to the BAFTR, please contact us to receive your discount code. 
 
*
HARMONIZED TARIFF SCHEDULE OF THE UNITED STATES (HTS, HTSA or HTSUSA)
, 1 Jul 2016: 19 USC 1202 Annex.  (“HTS” and “HTSA” are often seen as abbreviations for the Harmonized Tariff Schedule of the United States Annotated, shortened versions of “HTSUSA”.)
  – Last Amendment: 12 Aug 2016; Harmonized System Update 1611, containing 2,707 ABI records and 743 harmonized tariff records.
  – HTS codes for AES are available
here
.
  – HTS codes that are not valid for AES are available
here.
 
*
INTERNATIONAL TRAFFIC IN ARMS REGULATIONS (ITAR)

22 C.F.R. Ch. I, Subch. M, Pts. 120-130 (Caution — The ITAR as posted on GPO’s eCFR website and linked on the DDTC often takes several weeks to update the latest amendments.)

  – Latest Amendment: 17 Aug 2016:
81 FR 54732-54737: Amendment to the International Traffic in Arms Regulations: Procedures for Obtaining State Department Authorization To Export Items Subject to the Export Administration Regulations; Revision to the Destination Control Statement; and Other Changes 
  – The only available fully updated copy (latest edition 17 Aug 2016) of the ITAR is contained in Bartlett’s Annotated ITAR (“BITAR”), by James E. Bartlett III.  The BITAR contains all ITAR amendments to date, plus a large Index, and over 700 footnotes containing case annotations, practice tips, DDTC guidance, and explanations of errors in the official ITAR text.  Subscribers receive updated copies of the BITAR in Word by email, usually revised within 24 hours after every ITAR amendment.  The BITAR is THE essential tool of the ITAR professional.  The BITAR is available by annual subscription from the Full Circle Compliance website.  BAFTR subscribers receive a 25% discount on subscriptions to the BITAR, please contact us to receive your discount code.

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EPEDITORIAL POLICY

* The Ex/Im Daily Update is a publication of FCC Advisory B.V., edited by James E. Bartlett III and Alexander Bosch, and emailed every business day to approximately 7,500 subscribers to inform readers of changes to defense and high-tech trade laws and regulations. We check the following sources daily: Federal Register, Congressional Record, Commerce/AES, Commerce/BIS, DHS/CBP, DOJ/ATF, DoD/DSS, DoD/DTSA, State/DDTC, Treasury/OFAC, White House, and similar websites of Australia, Canada, U.K., and other countries and international organizations.  Due to space limitations, we do not post Arms Sales notifications, Denied Party listings, or Customs AD/CVD items.

* INTERNET ACCESS AND BACK ISSUES: The National Defense Industrial Association (“NDIA”) posts the Daily Update on line, and maintains back issues since August, 2009 here.

* RIGHTS & RESTRICTIONS: This email contains no proprietary, classified, or export-controlled information. All items are obtained from public sources or are published with permission of private contributors, and may be freely circulated without further permission. Any further use of contributors’ material, however, must comply with applicable copyright laws.

* CAVEAT: The contents cannot be relied upon as legal or expert advice.  Consult your own legal counsel or compliance specialists before taking actions based upon news items or opinions from this or other unofficial sources.  If any U.S. federal tax issue is discussed in this communication, it was not intended or written by the author or sender for tax or legal advice, and cannot be used for the purpose of avoiding penalties under the Internal Revenue Code or promoting, marketing, or recommending to another party any transaction or tax-related matter.

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